TheMoneyGeek Unplugged

The federal government officially shut down many of its operations at 12:01 a.m. on October 1, 2025. (1) This is the 15th government shutdown since 1980. Most were short, lasting one to three days. The longest lasted 34 full days, from December 2018 to January 2019. (2)

It’s impossible to predict how long the current shutdown might last, but it may be helpful to know more about why it happened and what you can expect if it continues.

Zero out of 12 appropriations bills

The federal fiscal year begins on October 1, and under normal procedures, twelve appropriations bills for various government sectors are expected to be passed by that date to fund activities ranging from federal employee salaries to national park operations and food safety inspections.

These appropriations are considered discretionary spending, meaning that Congress has the flexibility to set the amounts. Obviously, it would be helpful for federal agencies to know their operating budgets in advance of the fiscal year, but all 12 appropriations bills have not been passed before October 1 (or any time during the year) since FY 1997. (3)

In 2018–19, five of the twelve appropriations bills had passed prior to the shutdown, which helped limit the damage. (4) This year, no appropriations bills have been passed. However, some agencies — primarily in the Department of Defense and Department of Homeland Security — received new funding from the One Big Beautiful Bill Act passed this summer, which may allow certain programs and functions to continue. (5)

Continuing resolutions and omnibus spending bills

To buy time for further negotiations, Congress typically passes a continuing resolution, which extends federal spending to a specific date, generally at or based on the level of the previous year. These bills are essentially placeholders that keep the government open until full-year spending legislation is enacted.

Even with the extensions provided by continuing resolutions, Congress seldom passes individual appropriations bills. Instead, they are often combined into massive omnibus spending bills that may include other provisions unrelated to funding.

The current situation

The U.S. Constitution gives the House of Representatives sole power to initiate revenue bills, so the House typically passes funding legislation and sends it to the Senate. Whereas the House can pass legislation with a simple majority, the Senate generally requires 60 votes to pass legislation due to the filibuster rule. This, in turn, typically requires cooperation from both political parties.

The House approved a continuing resolution that would extend funding for seven weeks at current levels of spending. Senate Republicans, with one exception, voted for the bill late on the night of September 30, joined by three Democrats for a total of 55 votes, five votes short of the 60 votes needed to pass. Earlier in the evening, a Democrat-sponsored continuing resolution also failed to pass. (6)

Although a larger group of Senate Democrats provided support for a similar continuing resolution in March, they have refused to support this resolution unless it includes an extension of Affordable Care Act (ACA) health insurance subsidies that are scheduled to expire on December 31, 2025.

Allowing the ACA subsidies to lapse could significantly raise health insurance premiums for many Americans, and Republican leadership has expressed a willingness to consider extending them, but not as part of the continuing resolution. Democrats also seek to reverse spending cuts to Medicaid. (7)

Effects of the shutdown

According to the law, the U.S. Treasury cannot spend money that has not been approved by Congress. Therefore, agencies that rely on discretionary spending cannot pay their employees or maintain essential services.

Each agency has its own shutdown plan. Certain “essential services” — primarily related to public safety — will continue and be funded retroactively after funding has been authorized. Here are the potential effects on some key services. (8–12)

· Mail will continue to be delivered because the U.S. Postal Service is self-funded.

· Social Security, Medicare, and Medicaid will continue to make payments because the funds for these programs do not require annual appropriations. However, other services, such as benefit verifications and application processing, may cease.

· Interest on Treasury securities will continue to be paid.

· Federal workers will not be paid. Workers considered “essential” will be required to work without pay, while others would typically be furloughed. However, the Trump administration has issued instructions that agencies should use the shutdown as an opportunity to reduce their workforces, an action that has not occurred during previous shutdowns. Lost wages for essential and furloughed employees will be reimbursed after funding is approved.

· Unlike federal employees, private contractors who often work side-by-side with federal employees are not guaranteed to be paid.

· Air travel could be affected. In 2019, high absenteeism among Transportation Security Administration (TSA) workers, who were required to work without pay, resulted in long lines, delays, and gate closures at some airports.

· Environmental and food inspections could stop.

· “Accessible areas” of national parks, such as roads, trails, and open-air memorials, will remain open, as will locations and services supported directly by visitor fees. Other areas may be closed, and visitor services may be unavailable.

· The Internal Revenue Service has special funding that will allow it to maintain operations for the first five business days of the shutdown. It’s unclear what would happen after that, but if a large number of workers are furloughed, the IRS would be unable to perform verifications for income and Social Security numbers, which could delay mortgage and other loan applications. Tax refunds could also be delayed.

· Key economic reports, like the monthly jobs report, may be delayed, making it more difficult for the Federal Reserve to gauge economic activity when making decisions.

· The National Flood Insurance Program will stop issuing policies or renewals.

· Federal student loan disbursements and grants to local school districts should continue, along with processing the Free Application for Federal Student Aid (FAFSA). However, an extended shutdown could cause delays in processing and support activities, and schools located on federal land, such as Indian reservations or military bases, could temporarily lose funding.

· The Supplemental Nutrition Assistance Program (SNAP or food stamps) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) will continue for now, but it is unclear how long they can be sustained.

While any shutdown causes hardship for federal workers and the citizens they serve, a brief shutdown typically has a minimal effect on the broader U.S. economy, because lost payments are generally made up after spending is authorized. However, an extended shutdown can be costly.

The Congressional Budget Office estimated that the 2018–19 shutdown reduced gross domestic product (GDP) by $11 billion, including $3 billion that was never recovered. Even so, this was a tiny fraction of GDP. (13)

Previous shutdowns have generally not significantly impacted global markets, except for some moderate short-term volatility. However, a prolonged shutdown could have a greater temporary impact. (14)

If the shutdown continues, be sure to check the status of federal agencies and services that may directly affect you.

Shutdown effects on markets and the debt ceiling

The current shutdown has sparked little more than a yawn among investors. On the first two days of the shutdown, the S&P 500 index closed higher, suggesting that many people are barely aware of what is happening or the potential ramifications.

Although the current debate is not directly related to the debt ceiling, we will likely confront that issue again in January.

The debt ceiling was temporarily suspended in August 2023 through December 31, 2024. However, once the suspension expired, the debt ceiling was reinstated to approximately $36.1 trillion to account for obligations incurred during the suspension period.

Congress raised the statutory debt ceiling by $5 trillion in July 2025, increasing the limit from $36.1 trillion to $41.1 trillion. Interestingly, the national debt is projected to surpass $39.4 trillion by January 1, 2026.

While it appears that markets are largely ignoring this current shutdown, if it drags on, it could become a bigger problem than most expect. The longer this issue continues, the closer we come to facing the same situation with the debt ceiling at the start of 2026.

Note: Projections are based on current conditions, are subject to change, and may not materialize as expected.

Sam H. Fawaz CFP®, CPA, PFS is the President of YDream Financial Services, Inc., a fee-only investment advisory and financial planning firm serving the entire United States. If you would like to review your current investment portfolio or discuss any other retirement, college, tax, or financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fiduciary financial planning firm that always puts your interests first, with no products to sell. If you are not a client, an initial consultation is complimentary, and there is never any pressure or hidden sales pitch. We begin with a thorough assessment of your unique personal situation. There is no rush and no cookie-cutter approach. Each client’s financial plan and investment objectives are unique.

Footnotes: 1) The Hill, October 1, 2025; 2, 5, 13) CBS News, September 29, 2025; 3) The New York Times, September 29, 2025; 4, 10) Committee for a Responsible Federal Budget, September 16, 2025; 6) The New York Times, September 30, 2025; 7) Associated Press, September 29, 2025, and October 1, 2025; 8) The Wall Street Journal, October 1, 2025; 9, 14) CNBC, October 1, 2025; 11) The New York Times, October 1, 2025; 12) ABC News, October 1, 2025